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Charles Dow lived more than 100 years ago and wrote about the stock market in ways that still apply today. Dow obviously lived before computers were invented and his ideas are even more amazing when that fact is considered. He couldn’t easily look at charts to learn from the past because charts were limited and the kind of charts we rely on today didn’t even exist at that time. In this way, Dow was a peer of his contemporary, Albert Einstein, who saw things differently. You may think a comparison between Einstein and Dow is a stretch but both advanced ...Read More

Interest rates are up since the election. Rates on the ten-year Treasury note has climbed more than 25% since Donald Trump became the President-elect. With the rate at 2.36%, investors with $1 million in ten-year Treasuries can earn income of $23,600 a year. This is a problem for two reasons. Many investors simply don’t have $1 million in Treasuries and if they do, the income of less than $2,000 a month may not be sufficient to maintain their standard of living.Elections always bring hope for change and this one is no different. The Federal Reserve is expected to raise interest ...Read More

Some investors claim value, like beauty, lies in the eye of the beholder. One of us might look at a stock with a price-to-earnings (P/E) ratio of 30 and see a bargain while others see an overvalued stock they’d never want to own. A true value investor might question why anyone besides an index investor would ever own a stock with a P/E ratio of 30. Index investors, of course, must own all of the stocks in the index they track no matter what the P/E ratio is.Value investors usually look for a low P/E ratio on an individual stock ...Read More

With many major stock market indexes trading near new all-time highs, we could be in the early stages of a new bull market. Or, we could also be near the end of a bull market and the beginning of a bear market. High prices have a way of increasing optimism in some investors and raising fear levels in others. Overall, there seems to be a stronger argument to be made for the bullish case and the bull market appears likely to continue for at least several months. Among the factors pointing to higher highs are a strong technical picture in ...Read More

In a recent post, we introduced Cloud Charts, formally known as Ichimoku Clouds. We received several questions about how to interpret the charts. While we generally like to provide answers to questions in the comments section of the blog, some answers require more space than that. When more space is needed, we sometimes devote a post to the question as we are doing now.Rather than cover Clouds in detail here, we will provide a quick review. The chart is visually distinctive.The most prominent feature on the chart is the shaded areas. These are the Clouds. There are actually five components ...Read More

Since the election, interest rates have been rising around the world. This is bad news for bond holders who have suffered losses of more than $1 trillion according to some estimates. When writing about interest rates, authors often note that bond prices move inversely to rates. When rates rise, prices fall. That’s about as far as the discussion goes. Instead of stopping there, we would like to put some specific numbers to the idea.Since the election, the interest rate on the ten-year Treasury note has moved up by almost 0.5%. The ten-year yield is the most commonly cited long-term interest ...Read More

Several weeks ago, we blogged about fundamental ratios and showed a head-to-head comparison of several of the best performing indicators. We received comments from some readers asking how the price-to-sales (P/S) ratio fared in that type of testing. In hindsight, we should have anticipated this question. The P/S ratio is popular, and for good reason. A number of studies have shown the ratio, which is also known as the PSR, works well.There are times when we can forget that investment analysis is a fairly new field of study. Many indicators have been developed within our own lifetimes. The P/S ...Read More

Technical analysis is an established discipline dating back to at least the 1800s. Some techniques are even older with candlestick patterns being used to trade rice markets in eighteenth century Japan according to legend. However, candlesticks were lost for centuries to Western traders and only became popular after they were reintroduced to the world in the 1980s. They were brought to the attention of traders in Western markets by Steve Nison in his book, Japanese Candlestick Charting Techniques, and Nison noted that based on his research, he believed the chart style was developed after 1850. While the exact history is ...Read More